Method and system for conducting electronic auctions with aggregate lotting for transformation bidding

ABSTRACT

An auction methodology wherein individual demands are bid in lots and an aggregation of several lots is then run as an individual lot to determine if the buyer can attract a lower price offering from bidders by selecting to award the total volume of all of the individual lots to one bidder. A bidder-specific transformation factor for the aggregate lot is computed by combining selected transformed values (one for each lot) that take into account that bidder&#39;s price offerings for individual lots and the buyer-specified transformation factors for that bidder. Each bidder is then invited to bid a discount percentage for the aggregate lot. This discount percentage is then used along with the bidder-specific transformation factor to generate that bidder&#39;s transformed value for the aggregate lot. The bidder with the lowest transformed value for the aggregate lot may be selected as the winning bidder. The combination of bid transformation and lot aggregation results in obtaining an optimum bid for the buyer because it allows the buyer to accurately evaluate the bids received for the aggregate lot.

CROSS REFERENCE TO RELATED APPLICATIONS

The present application is a continuation-in-part of the U.S. patentapplication Ser. No. 09/282,157, titled “Method and System forConducting Electronic Auctions with Multi-Parameter Price EqualizationBidding” and filed on Mar. 31, 1999, which is currently pending andassigned to the assignee of the present invention.

BACKGROUND

1. Field of the Invention

The disclosed invention generally relates to conducting onlineelectronic auctions, and, more particularly, to an online electronicauction methodology that employs aggregate lotting for transformationbidding.

2. Description of Related Art

Procurement of goods and services have traditionally involved hightransaction costs. The cost of finding and qualifying potential biddershas been particularly high. The advent of electronic commerce hasintroduced new methods of procurement that lower some of the transactioncosts associated with procurement. Electronic procurement, in particularbusiness-to-business electronic procurement, matches buyers andsuppliers and facilitates transactions that take place on networkedprocessors.

Four models of electronic procurement have been developed: catalog,buyer-bidding auctions, seller-bidding auctions, and exchangemarketplaces.

The “catalog” model was an early form of online electronic procurement.Initially, electronic catalogs were developed primarily by sellers,typically suppliers, to help customers obtain information aboutproducts, and order supplies electronically. Those first electroniccatalogs were single-source; i.e. they only allowed customers to obtaininformation and products from a specific supplier.

Although the first electronic catalogs reduced the information searchcost associated with procurement, customers were disadvantageously“locked in” to one supplier at each electronic catalog. Customers werethus unable to compare a number of competing products in a singlecatalog. Therefore, certain suppliers with single-source catalogs beganincluding competitors' products in their systems. The inclusion ofcompeting products in electronic catalogs reduced procurementinformation search costs even further. By offering competing products,electronic catalogs became “electronic markets.”

Many electronic catalogs, however, were biased toward the supplieroffering the electronic catalog, and it was thought that procurementcosts could be lowered further through an unbiased market. Therefore,third-party “market makers” developed markets for many standard productsand services, which were intended to be unbiased markets.

Electronic commerce using the electronic catalog model typicallyinvolves one buyer and one seller at a time. When many buyers competefor the right to buy from one seller, a buyer-bidding auction model, orforward auction, is created. Catalog and buyer-bidding auction models,however, have limitations and do not work well in every situation. Forexample, it is difficult for a supplier to publish set prices in acatalog for custom products. Therefore, when a buyer requires a customproduct, pricing for that product typically will not be found in acatalog. Likewise, it is difficult to specify a custom product andidentify buyers who might use that custom product for a buyer-biddingauction. Additionally, there may be only one buyer interested in acustom product, such that a buyer-bidding auction may not be applicablein all cases. Thus, few suppliers can typically provide custom goods andservices and standard product and pricing information is typically notavailable for buyers of custom industrial products.

Referring again to the cost of traditional procurement, and particularlyprocurement of custom products and services, when a company required acustom product, a buyer/purchaser for the company would typicallyprocure the product by searching for potential suppliers and thenacquire price quotes from the potential suppliers for the needed customproduct. The search tended to be slow and random, and typically reliedheavily on personal relationships. The costs associated with locatingvendors, comparing prices, and negotiating a deal were therefore large.The cost of switching suppliers was also large, such that an incumbentsupplier's quoted price was most likely not the lowest price he couldoffer because the incumbent supplier knew the buyer would face switchingcosts to use another supplier. As an additional consequence, newsuppliers had a difficult time entering the market because of those highswitching costs.

Therefore, supplier-bidding auctions for products and services definedby a buyer have been developed. The assignee of the present applicationhas developed a system in which sellers downwardly bid against oneanother to achieve the lowest market price in a supplier-biddingauction. In such auctions, various goods or services may simultaneouslybe placed for auction.

Traditional online auctions focus on price as the sole variable uponwhich the online competition is based. Price is the sole biddingparameter that is provided by the bidders and hence is the soleparameter upon which a selection process is made. Relative valuationsbetween different bid prices is quick and intuitive.

Traditionally, the buyer independently negotiates with each bidder tosubjectively weigh different factors or non-price parameters prior toits decision-making. In a typical business-to-business auctionsituation, however, it is desirable to consider a plurality of non-priceparameters in combination with the bidder's price and allow the buyer toreadily compare various multi-parameter bids to evaluate each bidder'sproposal. As a simplified example, consider coal. Coal varies in itsthermal content (i.e., BTU content) as well as in its sulfur content.Buyers would be willing to pay more, all things being equal, for higherthermal content or lower sulfur content. Sellers cannot readily changethe composition of their coal. Therefore, it has traditionally beendifficult to conduct an auction for coal, because not all coal is equal.It is therefore desirable to devise an online auction scheme that allows“apples-to-apples” comparison when multi-parameter bids are received. Itis further desirable to allow the buyer to test the online auctionmarketplace to determine if the buyer can attract a lower price fromsuppliers by awarding one supplier the total volume of all of theindividual lots that buyer has on auction.

SUMMARY

In one embodiment, the present invention contemplates a method ofconducting an auction, wherein each of a first bidder and a secondbidder is competing for a first lot and a second lot to be auctioned byan auction requester The method comprises receiving at least one bid foreach of the first and the second lots from each of the first and thesecond bidders; waiting until bidding for each of the first and thesecond lots is closed; inviting the first and the second bidders tooffer a first price and a second price respectively for an aggregate lotafter the bidding for each of the first and the second lots is closed,wherein the aggregate lot is created by combining the first and thesecond lots; computing a first transformed price for the aggregate lotfrom the first price and from one or more bids received from the firstbidder for the first and the second lots; and computing a secondtransformed price for the aggregate lot from the second price and fromone or more bids received from the second bidder for the first and thesecond lots.

In one embodiment, prior to commencing bidding on the aggregate lot, acorresponding transformed value is generated for each bid received froma bidder using a set of bidder-specific transformation factors specifiedby the auction requester for each lot on auction. Thereafter, atransformation factor is computed for each bidder for the aggregate lot.The transformation factor for each bidder may be computed by adding alllowest transformed values for that bidder—one from each individual loton auction. Based on this bidder-specific transformation factor for theaggregate lot and based on the discount price received from that bidderfor the aggregate lot, a final bidder-specific transformed value iscomputed for the aggregate lot for that bidder. All thesebidder-specific transformed values for the aggregate lot are thencompared to determine the winning bid.

The bidders may enter their bids from their computer terminals, whichmay be connected to an auction coordinator's computer via acommunication network (e.g., the Internet). The buyer's or auctionrequester's computer is also connected to the auction coordinator'scomputer via the Internet or via any other computer data communicationnetwork (e.g., a LAN). The bidding software may reside on the auctioncoordinator's computer and may assist in conducting the online auctionaccording to the teachings of the present invention.

According to the auction methodology of the present invention,individual demands are bid in lots and an aggregation of several lots isthen run as an individual lot to determine if the buyer can attract alower price offering from bidders by selecting to award the total volumeof all of the individual lots to one bidder. The bidder with the lowesttransformed value for the aggregate lot may be selected as the winningbidder. The combination of bid transformation and lot aggregationresults in obtaining an optimum bid for the buyer because it allows thebuyer to accurately evaluate the bids received for the aggregate lot.

BRIEF DESCRIPTION OF THE DRAWINGS

The accompanying drawings, which are included to provide a furtherunderstanding of the invention and are incorporated in and constitute apart of this specification, illustrate embodiments of the invention thattogether with the description serve to explain the principles of theinvention. In the drawings:

FIG. 1A is a schematic illustration of the entities involved in anembodiment of an auction wherein the sponsor identifies goods orservices to be purchased in a request for quotation;

FIG. 1B is a schematic illustration of entities participating in anembodiment of an auction;

FIG. 1C is a schematic illustration of entities participating in anembodiment of a contract award following an auction;

FIG. 2 is a schematic illustration of communications links between thecoordinator, the buyer, and the suppliers in an embodiment of anauction;

FIG. 3 is a schematic illustration of auction software and computershosting that software in an embodiment of an auction;

FIG. 4 is a schematic illustration of an embodiment of an auctionnetwork;

FIG. 5 illustrates a bid transformation function;

FIGS. 6A-6C illustrate bid history charts based upon buyer and supplierviewpoints;

FIG. 7 illustrates an exemplary table showing how an aggregate lot isformed;

FIG. 8 shows a flowchart depicting the aggregate lotting auctionmethodology according to the present invention;

FIG. 9 depicts an exemplary table showing a set of transformationfactors assigned to a corresponding set of offerings from a supplier;

FIG. 10 illustrates an exemplary table showing which individualofferings from a supplier are selected to determine the transformationfactor for that supplier for the aggregate lot;

FIG. 11 shows an exemplary table illustrating a bidding received from asupplier for an aggregate lot; and

FIG. 12 illustrates an exemplary table showing transformed values forthe bids received from four suppliers for an aggregate lot.

DETAILED DESCRIPTION

Reference will now be made in detail to the preferred embodiments of thepresent invention, examples of which are illustrated in the accompanyingdrawings. It is to be understood that the figures and descriptions ofthe present invention included herein illustrate and describe elementsthat are of particular relevance to the present invention, whileeliminating, for purposes of clarity, other elements found in typicalauction systems and computer networks. It is noted that the presentinvention described below extends the operation of the inventive auctionsystem and method described in greater detail in the co-pending U.S.patent application Ser. No. 09/252,790, titled “Method and System forConducting Electronic Auctions,” filed on Feb. 19, 1999, the disclosureof which is hereby expressly incorporated in the present application.

In a supplier-bidding auction or reverse auction, bids, which are oftenin the form of a price quote, typically start high and move downwardover time as bidders interact to establish a closing price. Typically,the auction marketplace is one-sided, with one buyer and many potentialsuppliers, although multiple-buyer auctions are possible. Typically,products are purchased in the form of components or materials.“Components” may include fabricated tangible pieces or parts that becomeparts of assemblies of durable products. Example components includegears, bearings, and appliance shelves. “Materials” may include bulkquantities of raw materials that are further transformed into products.Example materials include corn syrup and sheet steel. Services may alsobe purchased in such a reverse auction.

It is noted that the terms “supplier” and “bidder” are usedinterchangeably herein to refer to a person or legal entityparticipating as a bidder in an on-line auction. Similarly, the terms“sponsor”, “buyer”, “purchaser” or “auction requester” are also usedinterchangeably herein to refer to a person or legal entity that puts upa lot (as defined hereinbelow) for auction and requests bids for thesame from the suppliers or bidders.

The basic process for a purchaser sponsored supplier-bidding or reverseauction, as conducted by the assignee of the present invention, isdescribed below with reference to FIGS. 1A-1C, which illustrate thefunctional elements and entities involved in setting up and conducting atypical supplier-bidding auction. FIG. 1A illustrates the creation of anauctioning event, FIG. 1B illustrates the bidding during an auction, andFIG. 1C illustrates results after completion of a successful auction. Itis noted that FIGS. 1A-1C are for illustrative purpose only. In otherwords, even though only three bidder 12, 14, and 16 are shown in theauction process depicted in FIGS. 1A-1C, it is obvious that in an actualauction there may be more or less than three bidders participating inthe auction depending on, for example, the products or services to beauctioned, the qualifications demanded of a bidder, how commerciallylucrative the auction is, the reputation of the sponsor 10, etc.

Industrial buyers do not typically purchase one component at a time.Rather, they tend to purchase whole families of similar components.Therefore, in a typical industrial supplier-bidding auction, productsare grouped together in “lots” of related items for bidding. In aregular lot bidding auction, each lot is composed of one or more “lineitems.” In the regular lot bidding auction, the suppliers bid on eachline item and the bidder having the best bid for all of the parts in thelot is the best bidder. The best bidder (e.g., the bidder 14 in FIG. 1C)is typically awarded a contract to supply the items in the lot. Bylotting products, potential suppliers can bid on lots for which they arebest suited, and are not typically required to bid on every lot. Such adivision into lots beneficially reduces the barrier to entry for newpotential suppliers that only have capability to supply some of theneeded products in the auction. Reducing the barrier to entry alsobenefits the purchaser by injecting additional bidders into bidding forcertain lots.

Typically, components in a lot are related to one another such that itis more efficient to have a supplier provide all of the components inthat lot. As an example, a buyer might purchase a given plastic knob intwo different colors, or might purchase a nameplate in four differentlanguages. Those parts are so similar that it is nearly always moreefficient to purchase those related components from the same supplierbecause, for example, all of the knobs may be made using with same mold.Thus, such related items are typically grouped in a single “lot.” As isknown by one skilled in the art, there are many additional methods oflotting products for an auction.

As will be apparent to one skilled in the art, while the invention isgenerally described in terms of one buyer and multiple suppliers, thepresent invention may also be used in other types of electronic markets,such as auctions having multiple potential buyers and sellers, forwardauctions having a single seller and multiple potential purchasers,upward-bidding auctions, or electronic exchange marketplaces. As notedhereinbefore, the term “sponsor” is utilized herein to identify theparty or parties that originate the auction. In a forward auction, forexample, the sponsor would typically be the supplier or seller of one ormore goods or services. In such a forward auction, that sponsor mightstate a good that it desires to sell and receive bids from partieswishing to purchase that good. Those parties wishing to purchase thatgood would therefore be “bidders” 12-16 in such a forward auction.

In a reverse auction example, the sponsor would typically be thepurchaser or buyer of one or more goods or services. In such a reverseauction, that supplier might state a good that it desires to purchaseand receive bids from parties wishing to supply that good. Those partieswishing to supply that good would furthermore be “bidders” 12-16 in sucha reverse auction.

In the typical supplier-bidding reverse auction model, the product orservice to be purchased is usually defined by the sponsor of theauction. As shown in the embodiment illustrated in FIG. 1A, when thesponsor 10 decides to use the auctioning system of the present inventionto procure products or services, the sponsor 10 provides information toan auction coordinator 20. That information may include informationabout incumbent suppliers and historic prices paid for the products orservices to be auctioned, for example. Typically, the sponsor 10 mayalso work with the auction coordinator 20 to define the products andservices to be purchased in the auction and, if desired, lot theproducts and services appropriately so that needed products and servicescan be procured using optimal auction dynamics. A specification may thenbe prepared for each desired product or service, and a Request forQuotation (“RFQ”) generated for the auction.

Next, the auction coordinator 20 typically identifies potentialsuppliers 12-16, preferably with input from the sponsor 10, and invitesthe potential suppliers 12-16 to participate in the upcoming auction.The suppliers 12-16 that are selected to participate in the auctionbecome bidders 12-16 and may be given access to the RFQ, typicallythrough an RFQ in a tangible form, such as on paper or in an electronicformat.

As shown in FIG. 1B, during a typical auction, bids are made for lots.Bidders 12-16 may submit actual unit prices for each line item within alot. However, the competition in an auction is typically based on theaggregate or total value bid for all line items within a lot. Theaggregate value bid for a lot may, therefore, depend on the level andmix of line item bids and the quantity of goods or services that areoffered for each line item. Thus, bidders submitting bids at the lineitem level may actually be competing on the lot level. During theauction, the sponsor 10 can typically monitor the bidding as it occurs.Bidders 12-16 may also be given market feedback during the auction sothat they may bid competitively.

Feedback about bidding activity is referred to as “market feedback” andincludes any information or data related to the bidders 12-16 or theirbids, interrelationships between those bids, and any other bid relatedinformation or data that is received before or during the auction.Market feedback may include, for example, bids that have been placed byother bidders 12-16, the rank of a bidder in relation to one or moreother bidders 12-16, the identity of bidders 12-16, or any subset ofthat information. Market feedback may also include non-pricinginformation such as, for example, the quality of the goods to beprovided by bidders 12-16 and shipping costs associated with one or morebidders 12-16. Providing such market feedback to bidders 12-16 in anauction helps create real-time competitive interaction amongparticipants in the auction because, without feedback, bidders 12-16 whoare not leading in an auction might not be aware of their relativeposition and would have less incentive to revise their price quotes andplace additional bids to remain competitive.

After the auction, the auction coordinator 20 may analyze the auctionresults with the sponsor 10. The sponsor 10 typically conducts finalqualification of the low bidding supplier or suppliers. The sponsor 10may furthermore retain the right not to award business to a low biddingsupplier (e.g., the supplier 14 in FIG. 1C) based on final qualificationor other business concerns. As shown in FIG. 1C, at least one supplycontract is usually drawn up and executed based on the results of theauction.

The auction may be conducted electronically between bidders 12-16 attheir respective remote sites and the auction coordinator 20 at itssite. In an alternative embodiment, instead of the auction coordinator20 managing the auction at its site, the sponsor 10 may itself performthe auction coordinator tasks at its site.

Information may be conveyed between the coordinator 20 and the bidders12-16 via any known communications medium. As shown in FIG. 2, bidders12-16 may participate in the auction through the Internet via a networkservice provider 40 accessed, for example, through a dial-up telephoneconnection. Alternately, sponsors 10 and bidders 12-16 may be coupled tothe auction by communicating directly with the coordinator 20 through apublic switched telephone network, a wireless network (including, forexample, a cellular telephone network), or any other known connectionmethod. Other methods of connecting sponsors 10 and bidders 12-16 andother communications media are known to those skilled in the art, andare intended to be included within the scope of the present invention.For example, the sponsor computer terminal 10 may be connected to theauction coordinator's computer terminal 20 via a LAN (local areanetwork), WAN (wide area network) or any other suitable datacommunication network.

Referring now to FIG. 3, a schematic illustration of auction softwareand computers hosting that software in an embodiment of an auction isshown. It is noted that for the sake of simplicity of illustration, FIG.3 illustrates an exemplary data communication setup only between theauction coordinator 20 and one of the bidders 12. However, the same datacommunication arrangement may be easily replicated for other bidders14,16 as is known in the art. Therefore, the discussion givenhereinbelow with reference to FIG. 3 equally applies to datacommunication between the computer terminals for other bidders (e.g.,bidders 14, 16) and the auction coordinator's computer terminal 20.Furthermore, it is noted that the same reference numeral is used hereinto refer to a person or entity and its computer terminal for ease ofdiscussion. For example, the reference numeral “20” is used in FIG. 2 torefer to the auction coordinator and in FIG. 3 to refer to the computerterminal accessible to or operated by the same auction coordinator.Similarly, the reference numeral “12” refers to the bidder-1 in FIG. 2and also to the computer terminal accessible to or operated by bidder-1as shown in FIG. 3.

As noted above, a computer software application may be used to managethe auction. The software application may include two components: aclient component 31 and a server component 23. FIG. 3 illustrates aserver component 23 and a client component 31 resident in respectivehost computers in one embodiment. As may be seen in FIG. 3, the servercomponent of that embodiment includes an operating system 24, the servermodule of the competitive bidding event (CBE) or auction communicationsoftware 26, and the server module of the Internet protocol software 27.The server software 23 is hosted on a computer 20 having a processor 21,random access memory 22, and a data storage facility 25. The hostcomputer 20 also includes input and output devices 29 such as, forexample, a monitor, printer, mouse and keyboard, and a communicationsinterface 28 (including, for example, a modem unit (not shown)) forcommunicating with the client component 31. As noted hereinbefore, thesponsor 10 may itself act as the auction coordinator 20. In that event,the sponsor's computer terminal 10 may function as the host computer 20and include the hardware and software described hereinabove for the hostcomputer 20.

The client component 31 of the embodiment illustrated in FIG. 3 includesan operating system 32, the client module of the CBE software 37, andthe client module of the Internet protocol software 35. The clientcomponent software 31 is hosted on a computer 12 having a processor 33,random access memory 34, and a data storage facility 36. The hostcomputer 12 also includes input and output devices 39 such as, forexample a monitor, a printer, a mouse and a keyboard, and acommunications interface 38 (including, for example, a modem unit (notshown)) for communicating with the server component 23.

In one embodiment, the auction coordinator's computer terminal 20 is anIBM-PC type computer system operating under the Microsoft Windows® NToperating system environment. Similarly, bidder-1's computer terminal 12is also an IBM-PC line of computer system with Windows® 2000 operatingsystem. The Internet protocol software 27 and 35 may include respectiveserver and client versions of the Microsoft Internet Explorer webbrowser software. Other web browsers, operating systems, or computerarchitectures may be conveniently employed as well. In one embodiment,the server and client modules (26 and 37 respectively) of the CBEcommunication software are written in C⁺⁺ programming language.

The client component 31 is used by the bidders 12-16 to make bids duringthe auction, and to receive and display (on the corresponding computermonitor or display terminal) feedback from the auction. The clientcomponent may, for example, be a program that is installed on a bidder'scomputer, or it may be software that resides at a web site which isaccessed by the bidder's computer to run/execute the client componentsoftware from that web site. In one embodiment, bids can typically onlybe submitted using the client component of the application, therebyensuring that sponsors 10 cannot circumvent the bidding process, andthat only invited suppliers 12-16 participate in the bidding. Eachcomputer software application (including the client and server modulesof the CBE communication software, 37 and 26 respectively) may be storedin the respective data storage device (36 and 25 respectively) andexecuted by the corresponding processor (33 and 21 respectively) asdescribed in connection with FIG. 4 hereinbelow.

Bids are sent by bidders (with the help of respective client modules ofthe CBE communications software 37 on the bidders' computers 12-16) overa communications medium (e.g., the Internet or a combination of otherwireline and wireless networks) to, for example, the auctioncoordinator's computer terminal 20, or, where the sponsor 10 itself isperforming auction coordination tasks, directly to the sponsor'scomputer terminal 10. Bids are received by the server component 23. Asnoted before, the client component 31 includes software functions formaking a connection over the communications medium to the servercomponent 23. Bids are submitted over this connection establishedbetween a client component 31 and the server component 23 and thefeedback information is sent from the server component 23 to respectiveclient component 31 on the connected bidders' computer terminals 12-16.

When a bidder 12-16 submits a bid through the bidder's computer terminalusing a data input device (e.g., a computer keyboard), that bid is firstreceived by the client component 31 (which may be resident in the memoryof the bidder's computer terminal or may be executed at a remote website as discussed hereinbefore), which then sends the bid to the servercomponent 23 to be evaluated to determine whether it is a valid oracceptable bid. Feedback about received bids is sent to connectedbidders 12-16 as is applicable, enabling bidders 12-16 receivingfeedback to see changes in market conditions and plan competitiveresponses.

The embodiments described herein utilize an online reverse auction as anexample in which the present invention may be utilized. In the reverseauction example, suppliers 12-16 bid to supply goods or services to apurchaser 10 and the purchaser 10 typically purchases the goods orservices from the lowest priced qualified bidder (e.g., the bidder 14 inFIG. 1C). It is to be understood, however, that the present inventionmay be used in other applications, would not necessarily have to becarried out online, and may be performed by other than a computerprocessor. The present invention may also be utilized in connection withauctions other than reverse auctions. For example, the present inventionmay be advantageously utilized with forward auctions, wherein the partyoffering the highest priced qualified bid, rather than the lowest pricedqualified bid (as, for example, in a reverse auction), is awarded thegoods or services being sold. Thus, placing a “better bid” in a reverseauction indicates placing a lower bid, while placing a “better bid” in aforward auction indicates placing a higher bid.

FIG. 4 is a diagram illustrating an auction network 70 of the presentinvention for operating an auction, and into which the server component23 and the client component 31 may be incorporated. The auction network70 may be divided into three functional sections: a client accessnetwork 71, a communications network 73, and a data processing network76. The client access network 71 may, for example, include one or moreclient machines 72 for accessing and communicating with thecommunications network 73. The communications network 73 may include oneor more primary communications servers 74, secondary communicationsservers 75, and directory, login and reporting servers 90. The dataprocessing network 76 may include production servers 77, training andreporting servers 80, reporting and training databases 86, andproduction databases 84. The production servers 77 and training andreporting servers 80 are referred to collectively herein as bid servers77 and 80. In one embodiment, the entities constituting thecommunications network 73 and the data processing network 76 may resideat the auction coordinator site and may be part of the auctioncoordinator's computer system 20.

The client machines 72 may be, for example, personal computers and maybe located at each bidder 12-16 and purchaser site 10 (e.g., when thepurchaser is not the same as the auction coordinator 20) for accessingthe auction. The client machines 72 may access the auction by, forexample, connecting to a web site operated by the party hosting theauction. The client machines 72 may also receive software from thecommunications network 73 that allows the client machines 72 tocommunicate with the communications network 73. Each client machine mayhave a configuration that includes at least a processor that executesapplicable software, and a data storage device that stores applicablesoftware and other auction data. One exemplary configuration for aclient machine 12 is shown in FIG. 3.

The primary communications servers 74 are utilized to provideinformation about bids received from the client machines 72 to the bidservers 77 and 80, and to provide other bid information from the bidservers 77 and 80 to the client machines 72. The primary communicationsservers 74 may furthermore act as a firewall to prevent direct access tothe bid servers 77 and 80 by the client machines. The secondarycommunications servers 75 act as backups to the primary communicationsservers 74. The secondary communications servers 75 will perform thecommunication functions normally performed by the primary communicationsservers 74 if a failure occurs in the primary communications servers 74,thereby providing redundancy to the auction network 70.

The directory, login, and reporting servers 90 may perform a variety offunctions that may include a single server or include separate serversfor the various functions. The directory, login, and reporting servers90 may include a web server (not, shown) that acts as a portal foraccess to the auction network 70. As such, the directory, login, andreporting servers 90 will receive login requests (from client machines72) for access to the auction network 70 via, for example, the Internet.The directory, login, and reporting servers 90 may make access decisionsas to whether a client machine 72 is permitted to access thecommunications network 73. If access is permitted, the directory, login,and reporting servers 90 will direct the client machine 72 to theappropriate portion of the auction network 70. The directory, login, andreporting servers 90, may provide reports to client machines 72. Forexample, information from prior auctions which may be utilized by thepurchaser 10 to make a decision as to which bidder 12-16 will be awardedthe sale and to permit the purchaser 10 to consider the way in which theauction proceeded so that future auctions may be refined.

The production servers 77 run the bidding software that facilitates theauction process such as, for example, the software whose functionalityis illustrated through the flowchart in FIG. 7. The bidding software maybe initially stored on an external storage medium (not shown) (e.g., acompact disc (CD), a digital versatile disc (DVD), a magnetic cartridgetape, or any other suitable magnetic or optical storage medium) or on aninternal storage medium (e.g., the storage 25 in FIG. 3) and thendownloaded/executed onto appropriate production servers 77 during theauction event. The production servers 77 may communicate with clientmachines 72 through primary and secondary communications servers 74 and75. The production servers 77 may also be redundant so that if a failureoccurs in the production server 77 that is being utilized in an auctionevent, the redundant-backup production server (not shown) may performthe functions of the failed production server 77 and, thus, preventfailure of the auction.

The training and reporting servers 80 operate in a manner similar to theproduction servers 77 and provide reports for auctions. It is useful tooperate test, auctions to test the operating systems and to trainpersonnel and clients. Such testing may be performed, on the productionservers 77 or, to prevent any degradation of system operation in actualauctions, one or more separate training servers (e.g., the servers 80)may be utilized for testing and training. Reporting may also beaccomplished on the production servers 77 or the report creationfunctions may be offloaded to one or more reporting servers 80. Thereporting servers 80 may furthermore be combined with the trainingservers 80.

Each server 74, 75, 77, 80, and 90 may have a processor (e.g., theprocessor 21 in FIG. 3) that executes applicable software (e.g., thebidding software), and a data storage device (e.g., the storage device25 in FIG. 3) that stores applicable software and data. It should benoted that, although the present invention is described in terms of aserver component 23 (FIG. 3) and a client component 31 (FIG. 3), oneskilled in the art will understand that the present invention is notlimited to a client/server program relationship model, and may beimplemented in a peer-to-peer communications model or any other modelknown to those skilled in the art. Data related to auctions may also bestored in the appropriate data storage device. The data storage devicemay include, either individually or in combination, for example, amagnetic storage device, a random access memory device (RAM), or a readonly memory device (ROM). The auction-related data may includepre-auction data, post auction data, and data that is related to activeauctions. Pre-auction data may include, for example, suppliers 12-16that are permitted to bid on a particular auction and the scheduledauction starting and ending times. Post auction data may include thebids and bid times received in a particular auction and reportsdisplaying that data in user friendly formats. Active auction data mayinclude data received from the bidders 12-16 as the auction is takingplace and related data such as the rank of each bidder, real-time bidhistory for a bidder, real-time comparative analysis of bids fromdifferent bidders, etc.

The “rank” of the bidders 12-16 is generally determined by comparing, inreal-time, the lowest amount bid by each bidder 12-16 and ordering thebidders 12-16 according to those lowest bids. The bidder who is rankedfirst is the bidder that has bid an amount lower than any other bidderin a reverse auction. The last rank may be a rank equal to the number ofbidders who have submitted bids in the auction. In the case of tie bidsbetween bidders, the last rank may be a rank equal to the number ofunique bids by each bidder. In a reverse auction based on price only,the bidder having that last rank is the bidder that has submitted thehighest amount.

Of course, there are many known ways to calculate the rank, and any ofthose may be used in connection with the subject invention, and areintended to be within the scope of the present invention. In a reverseauction, the bidders 12-16 are generally ranked between first and lastaccording to the amounts of their lowest submitted bids at any giventime. Thus, a higher, or better ranked bidder (e.g., the bidder 14 inFIG. 1C) in a reverse auction is a bidder who has placed a comparativelylower bid, while a higher, or better ranked bidder in a forward auctionis a bidder who has placed a comparatively higher bid.

An auction may alternately be based on one or more factors other thanprice, such as quality, delivery factors (e.g., labor rate, lead time),and/or other factors (e.g., contract length) that are referred to hereincollectively as “total value.” Thus, rank may also be based on factorsother than price, including total value and any other factor that isuseful in an auction setting. A bid or bid amount is a value that issubmitted by each participating bidder 12-16 for comparison to the bidsof other bidders, and may likewise be based on a variety of bid factorsthat are considered important to the bid participants. Those factors mayinclude, for example, price, quality, other costs such as deliverycosts, labor rate, project lead time, contract length, or a total value.Bids may also be placed in a number of ways including, for example,absolute total value, or comparative value such as bidding in relationto an index price.

Three databases, or groupings of databases, are incorporated into theauction network illustrated in FIG. 4. The production databases 84 holddata that will be used by or is received from the production servers 77,while the reporting and training databases 86 hold data that will beused by or is received from the training and reporting servers 80.

The directory, login, and reporting servers 90 may provide a web portalfor the client machines 72. The directory, login, and reporting servers90 provide an initial contact point for the client machines 72, accessto auctions in which the client machine 72 is permitted to participate,and reports relating to active and closed auctions.

One skilled in the art will recognize that certain components of thenetwork described herein, while beneficial to an auction network, arenot necessary components in an operational auction network. For example,the secondary communications servers 75 could be removed where thebenefit of redundancy is not desired, and the primary communicationsservers 74 could be removed and the client machines 72 could communicatedirectly with the bid servers 77 and 80.

In the discussion given hereinbelow, the term “price parameter” is usedinterchangeably and synonymously with the term “price” to indicate thebid price (e.g., a dollar value) for a lot on auction. On the otherhand, the term “non-price parameter” is used to include, as an example,the parameters such as lead time, labor rate, contract length, etc.,that a bidder can place bids for. It is noted that the prime bidparameter may still be the price or cost of each lot on auction.However, other non-price bid parameters may be used to request bids forand to generate auction competition among the bidders, therebybenefiting the buyer.

Traditional online auctions focus on price as the sole variable uponwhich the online competition is based. Price is the sole biddingparameter that is provided by the bidders and hence is the soleparameter upon which a selection process is made. Relative valuationsbetween different bid prices is quick and intuitive. However, in manytypes of business transactions, price is not the sole parameter uponwhich a decision is made. For example, in the negotiations for a supplycontract, a buyer will compare various proposals not only on the basisof price but also on the basis of the non-price characteristics ofnon-standard goods, the location of the supplier, the reputation of thesupplier, the length of the contract, etc. In a typicalbusiness-to-business auction situation, a plurality of parameters(non-price) are considered in combination with the supplier's priceproposal.

In these situations, purchasers traditionally negotiate with eachsupplier independently because multi-parameter bids cannot be readilycompared. Actual comparisons by the purchaser are based on a combinationof subjective and objective weighting functions. Bidders do nottypically have access to information on the buyer-defined weightingfunctions. At most, bidders would be selectively informed (at theirdisadvantage) of aspects of other competing bids. The limitedcommunication of information between bidders limits the potential oftrue competition between the bidders. The absence of competition lowersthe likelihood that the bidders will approach their true walk-away bid.Further, the manual weighting process is time consuming and subject toinconsistency from one application to the next.

The present invention is designed to create a market of competition inbusiness transactions that traditionally could not take advantage ofnatural auction dynamics. Competition is fostered through thetransformation of multi-parameter bids into comparable units of measure.This transformation process enables an apples-to-apples comparison ofdisparate bids. The following description of the features of the presentinvention is presented in the context of downward-based onlineindustrial auctions (i.e., supplier-bidding reverse auctions). As wouldbe appreciated by one of ordinary skill in the relevant art, theseinventive features could also be applied in the context of upward-basedonline auctions as well.

As noted, multi-parameter bids cannot be readily compared. Comparison ofmulti-parameter bids cannot be realized unless the relative impact (orweighting) of each of the individual bidding parameters is known.Intuition that is based on subjective assessments (or valuations) ofmultiple bid parameters cannot create an efficient market becausesubjective assessments are inconsistently applied and applied afterlengthy delays. Multi-parameter bid transformation enables true auctioncompetition because it forces a greater degree of objectivity into thevaluation process and is accomplished in real-time, allowing an auctiondynamic to occur. Comparison of bids can therefore be accomplished inaccordance with one or more comparative bid parameters.

A generic transformation mechanism is illustrated in FIG. 5. Asillustrated, bid transformation 500 represents a function (f) that isoperative on input variables (x) and (a₁ . . . a_(n)). Input variables(a₁ . . . a_(n)) represent non-comparative bid parameters, while inputvariable (x) represents a supplier comparative bid parameter (e.g.,price). The output of bid transformation 500 is the buyer comparativebid parameter (y).

In one embodiment, the bid transformation function (f) is a linear ornon-linear analytic function that is calculated in real-time. In anotherembodiment, the bid transformation function (f) is a linear ornon-linear function that is implemented via lookup tables. In yetanother embodiment, the transformation function is a combination of ananalytic linear function, analytic non-linear function, and table lookupfunction. The combination can be nested more than one layer deep.

In the generic description of the transformation process in FIG. 5, twotypes of comparative bid parameters exist. A buyer comparative bidparameter (y) refers to a parameter, resulting from the transformationprocess, upon which the buyer (e.g., the buyer 10) will comparecompeting bids. A supplier comparative bid parameter (x), on the otherhand, refers to an input to the transformation function (f). As will bedescribed in greater detail below, the supplier comparative bidparameter can be used by a supplier (e.g., bidders 12-16) to comparecompeting bids in the supplier's context. In some applications, thesupplier comparative bid parameter is not used because all parties maybe allowed to view the auction in the buyer's context.

As noted, non-comparative bid parameters are also used as inputs to thetransformation process. Unlike supplier comparative bid parameters,non-comparative bid parameters (e.g., non-price parameters) are notdirectly used to compare competing bids.

In this transformation framework, a supplier comparative bid parametervalue can be modified by the transformation process based uponnon-comparative bid parameter values to yield a buyer comparative bidparameter value. This scenario is discussed below in the context of thecoal market.

Alternatively, the transformation process can use multiplenon-comparative bid parameters to create a buyer comparative bidparameter. In this case, no supplier comparative bid parameters are usedto create supplier specific views. All parties view the competition inthe same context. An example of this scenario is net present value (NPV)bidding, where parameters specifying multi-year contracts are convertedinto a total NPV bid. The total NPV bid represents a sum of a series ofpayments over multiple contract years, which are discounted to a presentvalue using a predefined discount rate structure. NPV bidding isdescribed in co-pending U.S. application Ser. No. 09/282,156, titled“Method and System for Conducting Electronic Auctions with Net PresentValue Bidding,” filed on Mar. 31, 1999, the disclosure of which ishereby expressly incorporated in the present application.

Where a single buyer comparative bid parameter (e.g., price) is outputby the transformation process, competition between bids is based on therelative magnitude of the values of the buyer comparative bid parameterassociated with each of the bidders. This relative magnitude of thecomparative bid parameters can be illustrated on a one-dimensional plot.Where multiple buyer comparative bid parameters are output by thetransformation process, competition between bids can be compared using amultiple dimensional plot. In most cases, the use of a single buyercomparative bid parameter is advantageous because it provides thesimplest means for all parties to unambiguously determine a relativeranking of bids.

The concepts and features of the present invention are now illustratedin the context of a particular application within the coal market. Coalpurchase decisions are based on a variety of factors relating to thecharacteristics of the coal as well as the characteristics of thebuyer's needs and physical facilities. Characteristics of the coalinclude factors such as thermal content (BTU/lb), percentage sulfur,percentage ash, percentage water/moisture, hardness, etc. Relevantcharacteristics of the buyer include the time frame of requireddelivery, types of power generation units, etc.

During negotiations with multiple coal suppliers, each of the relevantfactors are evaluated in combination to determine the relativeattractiveness of each of the received bids. The evaluation process isoften a combination of subjective judgment, based on instinct andexperience, and hard quantitative analysis. As one can readilyappreciate, this evaluation process, although typical, is time consumingand adds great uncertainty for the suppliers.

Time delays are inherent since each supplier is negotiated withindependently. Suppliers face great uncertainty in this process becausethe internal subjective/quantitative metrics used by the buyer in theevaluation process are inconsistently applied. Negotiation tacticsdictate that the subjective/quantitative metrics used by the buyer arenot provided to the suppliers. This confidential information gives thebuyer leverage in altering the supplier's perception of the relativeattractiveness of the submitted bid. During the negotiation process,suppliers may be selectively informed (at their disadvantage) of aspectsof the decision making process.

Limited communication of information to the suppliers limits thepotential of true competition between the suppliers. The absence ofcompetition lowers the likelihood that the suppliers will approach theirbest offer.

The present invention creates true competition between suppliers in anauction system that enables comparison of truly disparate bids. Whiletraditional auctions focus on price as the sole variable of onlinecompetition, the present invention also factors in non-price variablesinto the bid evaluation and award process.

In the coal market example, the buyer may be ultimately interested inthe price per unit energy produced when the coal is processed throughtheir power generation unit. As noted, all coal is not created equal.The characteristics of the particular coal being offered by a suppliermay be unique to that supplier. Moreover, different power generationunits will produce different quantities of energy from identical coal,due to engineering differences built into the power generation units.

Bids for coal are typically submitted on a price per physical measure ofweight or volume (e.g., $/ton) basis. The raw $/ton bids of theparticipating suppliers cannot be readily compared to each other due tothe underlying characteristics of the coal. A mechanism is thereforerequired to transform each of the bids into a context that enables anapples-to-apples comparison such that the buyer can choose the mostcompetitive bid. In the coal market example, the transformation processis designed to transform the $/ton bids for unique lots of coal intostandardized units of value to the buyer (e.g., price-per-unit-of-energybids such as ¢/Million BTU). After all of the $/ton bids are transformedinto ¢/Million BTU bids, the buyer can readily identify the marketleading bids.

It should be noted that the standardized units of value to the buyer caninclude various forms such as a cost per unit of thermal content fromthe coal, a cost per unit of electrical energy output from a generationfacility burning the coal, the revenue from selling electrical energyoutput of a generation facility burning the coal, a measure of profitcontribution from selling electrical energy output of a generationfacility burning the coal, a measure of the net present value of adecision to accept the coal, wherein the decision is modeled to takeinto account the overall improvement in the buyer's economic condition,including revenue generated, costs avoided, risks mitigated, or assetvaluation improved.

The latter example is a function that implements the notion thataccepting a certain coal bid might have a portfolio effect on thebuyer's overall situation, or might change the economics of a certainproject. For example, a buyer might be considering whether to build anew power plant, and since coal is a high percentage of the life cyclecost of the power plant, changes in the price of coal offered to thebuyer might change the overall value of the plant.

The transformation function used in the coal market has been modeled asa linear transformation. In this linear transformation, a suppliers raw$/ton bid is modified using multiplicative and additive adjustments (orfactors) to yield a ¢/Million BTU bid. Each of the multiplicative andadditive factors are based upon characteristics (e.g., coalcharacteristics, delivery specifications, etc.) of a submitted bid.

It should be noted that the characteristics of a supplier's coal mayhave been identified prior to the start of the auction. In this case,multiplicative and additive factors are determined prior to the start ofthe auction and stored in memory by the server component. During theauction process, the multiplicative and additive factors are retrievedfrom memory and used to transform the raw $/ton bid into a ¢/Million BTUbid. In one embodiment, a multiplicative and/or additive factor isstored by the server component for each of the characteristics of thesupplier's coal. In an alternative embodiment, a single multiplicativefactor and a single additive factor, representative of the cumulativeeffect of the characteristics of the coal in the linear transformation,is stored.

In another scenario, the characteristics of a supplier's coal areprovided as part of a supplier's first submitted bid along with the raw$/ton bid to the server component. In this case, the characteristics ofthe supplier's coal (i.e., BTU/lb, % sulfur, % ash, % water, etc.) wouldbe fed by the server component 23 into the transformation function todetermine, in real-time, the buyer comparative bid parameter that is theresult of the transformation function. The server component 23 may storethe net result of the transformation function factors in memory forretrieval in the transformation of future bids by that supplier.

The transformation process in the coal market example can be genericallycharacterized by the transformation process illustrated in FIG. 5. Inthe coal market example, the output of the transformation process is the¢/Million BTU parameter. The ¢/Million BTU parameter represents thebasis upon which a buyer will compare the bids submitted by theparticipating suppliers. Accordingly, the ¢/Million BTU parameterrepresents a buyer comparative bid parameter.

In the coal example, the transformation process takes as inputs bothcomparative and non-comparative bid parameters. The non-comparative bidparameters represent the characteristics of the coal (i.e., BTU/lb, %sulfur, % ash, % water, delivery time, etc.) and the characteristics ofthe buyer. The $/ton price parameter represents a supplier comparativebid parameter. In combination, the comparative and non-comparative bidparameters are operated upon by the transformation function (f) to yieldthe buyer comparative bid parameter value in ¢/Million BTU.

At this point, it should be noted that the supplier comparative bidparameter ($/ton) is significant because it enables the supplier to viewa relative comparison of bids in the supplier's individual context. Thisfeature of the present invention will be described in greater detailbelow in the discussion of the de-transformation and feedback parts ofthe auction process.

After each of the submitted bids have been transformed into the buyercomparative bid parameter ¢/Million BTU, an “apples-to-apples”comparison can be performed. The “apples-to-apples” comparison can beeffected in any of a variety of ways including the bid history chart ofFIG. 6A. The bid history chart of FIG. 6A illustrates a relative rankingof transformed received bids in ¢/Million BTU.

Having received a bid from a participating supplier, the auction servermust then broadcast market feedback to the other participatingsuppliers. This broadcast function creates a real-time onlinecompetition between suppliers who are able to view the activities oftheir competitors and plan their corresponding response strategy.

In the coal market, the specific factors used in the transformationfunction are often confidential to the buyer. Accordingly, the buyerdesires to prevent the suppliers from gaining insight into aspects ofthe transformation function that quantifies the buyer's weighting ofvarious parameters associated with a supplier's bid. For this reason,the auction server does not feedback the transformed bids to theparticipating suppliers. Rather, the auction server broadcasts bids thathave been de-transformed from the buyer comparative bid parameter (i.e.,¢/Million BTU) into the context (i.e., $/ton) of the individualsuppliers.

The $/ton bid for a supplier is referred to as the supplier comparativebid parameter. As illustrated in FIG. 5, the supplier comparative bidparameter is one of the inputs into the transformation function (f). Thesupplier comparative bid parameter is significant because it enables thesupplier to view the auction competition in his own context. In otherwords, a supplier can view all competing bids as if all suppliers wereoffering the same type of coal for sale. In this manner, a supplier canview the competitive auction landscape without receiving any informationconcerning the transformation function that has been defined by thebuyer.

In the coal example, the transformation process is modeled as a linearfunction, having at least one multiplicative factor and/or at least oneadditive factor. This transformation can be represented by the wellknown algebraic function y=mx+b, where m is the multiplicative factor, bis the additive factor, x is the supplier comparative bid parameter, andy is the buyer comparative bid parameter.

Bids viewed in the buyer's context have been converted into the buyercomparative bid parameter (i.e., ¢/Million BTU). On the supplier side,each of the bids submitted from other participating suppliers arede-transformed from the buyer comparative bid parameter into thesupplier comparative bid parameter. This de-transformation isaccomplished by solving the formula for x to yield the formulax=(y−b)/m. In this de-transformation process, ¢/Million BTU bid valuesthat are to be broadcast to Supplier A are converted to $/ton bid valuesusing the multiplicative and/or additive factors for Supplier A.

After the client component 31 at Supplier A receives the de-transformedbid values, Supplier A is then able to view a relative comparison of thebids in his own context. This relative comparison corresponds to therelative comparison of the bids in the buyer context. FIG. 6Billustrates a bid history chart in the context of Supplier A. In thisexample, it is assumed that Supplier A's multiplicative and additivefactors are, m=0.87 and b=80, respectively.

As FIG. 6B demonstrates, Supplier A can view the competitive climate ofthe auction without having access to any of the details of thetransformation function (f) implemented by the buyer. From Supplier A'sperspective, all other suppliers are bidding the same type of coal.Competition is therefore perceived as being based on the $/ton price,not the ¢/Million BTU price. If Supplier A decides to beat the marketleading bid, Supplier A would simply reduce his $/ton bid and submit thenew bid (e.g., bid of $17.01/ton bid at 01:25:28) to the auction server.The new $17.01/ton bid would then be transformed into a 94.8 ¢/MillionBTU bid, i.e., 0.87*17.01+80=94.8 ¢/Million BTU, using themultiplicative and additive adjustments for Supplier A.

In a similar manner, Supplier B can also view the competitive climate ofthe auction without having access to any of the details of thetransformation function implemented by the buyer. Supplier B's view isillustrated in FIG. 6C. In this example, it is assumed that Supplier B'smultiplicative and additive factors are, m=0.81 and b=82, respectively.In Supplier B's view, Supplier A's new bid of $17.01/ton (or 94.8¢/Million BTU) at 01:25:28 is fed back to Supplier B as a $15.80/tonbid, i.e., (94.8−82)/0.81=$15.80/ton, using Supplier B's multiplicativeand additive parameters.

In combination, FIGS. 6A-6C illustrate a feature of the presentinvention that enables each supplier to view the auction in his owncontext. These buyer-specific and supplier-specific contexts enable thesystem to create a coal auction market without revealing confidentialinformation to the suppliers. The creation of an online electronicauction greatly benefits the buyer by allowing tie buyer to; get truemarket prices. The online electronic auction can easily produce hundredsof bids in a span of a few hours. This is in sharp contrast totraditional coal market mechanisms that relied upon the simultaneousoccurrence of independent negotiations over a course of weeks.

It should be noted that a supplier may simultaneously offer a pluralityof products of differing technical specifications. In this case, thetransformation function must treat these offerings separately. Eachoffering has its own context, and an array of de-transformed bid valuesunique to that offering.

It should be noted that a supplier could also modify a bid by changing anon-price parameter. For example, instead of changing the $/ton bid, asupplier could choose to change a particular characteristic (e.g., %ash, % sulfur, etc.) of the coal that is being bid. This new type ofcoal can be based upon a mixture or blend of different types of coalwithin the supplier's control. By adjusting the characteristics of thecoal, the supplier is effectively adjusting the multiplicative factorand/or additive factor that defines his transformation function. Forthis reason, the new blend of coal would define a new context for thatsupplier. The supplier would then have the option of amending anexisting offering or creating a second offering. If the supplier createsa new offering, viewing that new blended bid within the context of theauction market would require a second bid history chart. In effect, thesupplier has entered two horses into the race. This has the additionalbenefit to suppliers of allowing them to balance their own supply withmarket demand in the most beneficial manner.

Another example of transformation bidding is multi-currency bidding.Multi-currency bidding is an auction format wherein the buyer views allsubmitted bids in a base currency (e.g., U.S. dollars), while each ofthe suppliers view all submitted bids in a local currency (e.g.,Japanese Yen, Swiss Francs, etc.). Multi-currency bidding is describedin co-pending U.S. application Ser. No. 09/282,158 titled “Method andSystem for Conducting Electronic Auctions with Multi-Currency Bidding,”filed on Mar. 31, 1999, the disclosure of which is hereby expresslyincorporated in the present application.

In the multi-currency bidding example, the local currency represents asupplier comparative bid parameter. The exchange rate between the localcurrency and the base currency represents a non-comparative bidparameter. It should be noted that in the multi-currency example, thenon-comparative bid parameter is provided by the buyer or independentparty instead of the supplier. In effect, the supplier's bid is a singleparameter (i.e., local currency price) to be transformed into a buyercomparative bid parameter (i.e., base currency price).

In a similar fashion as the coal market example, each of the supplierscan view the auction in their own context (or local currency). Here,confidentiality of the transformation process is not the driver forseparate supplier views. Rather, separate supplier views are desiredbecause of user unfamiliarity of viewing prices in a foreign currency.De-transformation is represented by the conversion of base currency bidsinto the relevant local currency.

In the multi-currency bidding application, the exchange rates are notconfidential. Accordingly, the transformation/de-transformation processcan be performed at the client component 31 and/or the auction servercomponent 23. For example, assume that Supplier A is bidding in JapaneseYen, Supplier B is bidding in Swiss Francs, and the buyer is viewing theauction in U.S. dollars. The client component of Supplier A can submitthe bid in Yen or in U.S. dollars. If the bid is to be submitted in U.S.dollars, the client component is configured to convert the bid todollars prior to submission to the auction server.

On the receiving end, the client component of Supplier B can receive abid price submitted by Supplier A in Yen, U.S. dollars or Swiss Francs.If the auction server sends a bid submitted by Supplier A in yen toSupplier B, the auction server is performing the de-transformationprocess (i.e., currency exchange to Yen). In this case, no currencyconversion is required by the client component of Supplier B.Alternatively, the client component of Supplier B can be configured toperform the currency exchange of Supplier A's bid. This currencyexchange can be based upon the receipt of a bid in the base currency(U.S. dollars) or Supplier A's local currency (Yen). In this case, thecurrency conversion is performed by the client component of Supplier Bprior to the display of Supplier A's bid to Supplier B.

In other embodiments, multi-parameter price equalization bidding can beused to solve other problems when price alone cannot adequatelydiscriminate between a plurality of offerings. One example concernstransportation costs. Because buyers often control inboundtransportation and have favorable contract rates, the transformationfunction might be configured to translate bids of FOB supplier pricinginto bids of FOB buyer. Another example concerns penalty factors buyersmight apply. Some suppliers may be assessed penalties due to additionalcost factors the buyer might have to assume. For example, an overseassupplier might be automatically penalized a given percent or fixedamount to cover the extra costs of travel, input/export duties, andinternational banking fees.

In other embodiments, the transformation function that converts thesupplier comparative bid parameter into buyer comparative bid parametersmight be non-linear. This non-linear transformation may be implementedin a variety of ways. In one embodiment, the algebraic transformationfunction (f) is defined as a non-linear function rather than a linearfunction. The form of this function might be a polynomial such asy=nx²+mx+b. It might also use logarithms or power functions.

In another embodiment, the transformation function (f) uses lookuptables. A lookup table is a form of transformation function whereby agiven input value or range of input values is translated into a givenoutput value. The lookup table is constructed in advance in such a waythat all possible values of input are translated into an acceptablevalue of output.

Non-linear transformation functions can serve to provide additionalemphasis to certain parameters. For example, a product's value may riseat a faster rate as a certain quality factor approaches perfection. Thevalue of a perfect diamond, for example, can be many times higher thanthe value of a slightly imperfect diamond. However, as the level ofimperfection rises, the drop off in value slows. This is a non-lineartransformation from an engineering attribute into value.

Lookup tables can be used to simplify preparation. For example, considerthe problem of translating FOB supplier prices into FOB buyer prices,including transportation costs between a supplier and a buyer. Intheory, a linear transportation function might be used to apply anadditive factor such as “cents per unit per mile shipped.” In practice,it can be far simpler to prepare an auction using a rule such as “within100 miles shipping is $0.01 per unit, between 101-250 miles shipping is$0.03 per unit, and above 250 miles shipping is $0.05 per unit.” In thiscase, a lookup table provides an easier implementation. In thisframework, supplier A located 60 miles from the buyer would be assessed$0.01 per unit for shipping, while supplier B located 105 miles from thebuyer and supplier C located 230 miles away would both be assessed $0.03per unit.

It should be noted that a combination of linear, non-linear, and lookuptable transformations might apply to any given auction. For example, alinear transformation function might be used, where various additivetransformation factors are themselves the output values from a lookuptable, another linear function, or a non-linear function. In otherwords, the transformation functions may be nested to include more thanone type of calculation in any given embodiment.

Generally, where the transformation function is non-confidential, thetransformation process can be implemented individually or jointly by theauction server component 23 and the individual client components 31. Thejoint implementation can be designed in various ways to achieve the samegoal, the support of individual buyer and supplier views.

As noted above, the transformation process can also be used in a contextwhere only a single view of the auction is available. Here, the buyerand each of the participating suppliers each view the auction based onthe buyer comparative bid parameter (e.g., NPV bidding).

In addition to generating transformed bid values for bids received foreach lot, the buyer 10 may wish to test the auction marketplace todetermine the value of aggregating the demand at a number of the buyer'slocations or for a number of different materials. The term “aggregatelotting” as used hereinbelow refers to a process where the individualdemands are bid in lots and an aggregation of several lots is then runas an individual lot to determine if the buyer 10 can attract a lowerprice offering from suppliers 12-16 by proposing to award one supplierthe total volume of all of the lots constituting the aggregated lot.Such a process is helpful to the buyer as it provides feedback to thebuyer on whether to award business as individual lots (to differentbidders) or as an aggregated grouping of lots (to a single bidder). FIG.7 illustrates an exemplary table 540 showing how an aggregate lot isformed. As shown in FIG. 7, the aggregate lot (i.e., Lot-4) is formed bycombining all individual lots (Lots 1, 2, 3) and offering theirmaterials as part of a combined lot (i.e., the aggregate lot-4). Asupplier bidding for the aggregate lot-4 will have to bid for all itsconstituent materials (here, Chlorine, Solvents and Lime).

It is noted that in the discussion given herein with reference to FIGS.7-12, three individual lots (lot-1, lot-2 and lot-3) and one aggregatelot (lot-4) are selected for the purpose of illustration only. Inreality, there may be more than three individual lots on auction, and,in that case, their aggregate lot may combine the materials beingauctioned through those individual lots. Furthermore, four suppliers(suppliers A, B, C and D) are also selected for the purpose ofillustration only. As noted herein, the aggregate lotting methodology ofthe present invention equally applies in the situation when there aremore or less than four suppliers.

When running a transformation bid with disparate transformation factorsacross lots for the same supplier and possibly having disparate volumesacross a number of lots, running an aggregate lot for auction becomesdifficult. The aggregated bid must weight the individual offerings foreach of the locations based on the buyer-assigned transformation factorfor that lot and the proportion of the aggregated volume represented bythat lot. Simply rolling the individual offerings into a weightedaverage may not work if a supplier was reducing the supplier's price atoily one location, because, in that case, the transformed price wouldnot be reflective of the true transformed price and would not haveallowed the supplier to bid multiple offerings in one or more individuallots. Therefore, in one embodiment of the present invention a bid formatis developed that would allow suppliers 12-16 to bid various offeringsof different values to the buyer 10 in individual lots. Furthermore, amethodology is developed to determine the accurate value of an offeringfor all of the business in an aggregate lot as discussed hereinbelowwith reference to FIGS. 8-12.

FIG. 8 shows a flowchart depicting the aggregate lotting auctionmethodology according to the present invention. When the auctioncommences (at block 550), each supplier 12-16 initiates and continuesbidding for each individual lot (block 552). It is noted that eachindividual lot is bid first, and the bidding on the aggregate lot is notallowed to commence until the bidding on each individual lot is closed.In other words, the bidding on the aggregate lot is paused so long asindividual lots are being bid. During individual lot biddings, thebidding software generates buyer-specific transformed bids in real-time(block 554) as per the bid transformation process discussedhereinbefore. The bidding and the bid-transformation process continuesuntil all individual lots are closed for further bidding (block 556).

As discussed hereinbefore, the transformation factors are adjustmentfactors that the buyer had indicated for each lot and for eachsupplier's offering(s). In some cases, the buyer 10 may request bids forbuyer's different sites. For example, a corporation (i.e., the buyer)may request bids for coal for its three different plants located inthree different states. In that case, it may happen that the buyer 10may not value the same offering (from a supplier) equally at eachparticipating site. Also, the buyer may not value two offerings for thesame lot in the same manner. For example, FIG. 9 depicts an exemplarytable 620 showing a set of transformation factors assigned to acorresponding set of offerings from a supplier (here referred to as thesupplier A). As shown in FIG. 9, the supplier A may input two differentofferings for the same site (e.g., site A) and for the same lot (e.g.,lot-1). For example, as noted hereinbefore, a supplier can change aparticular characteristic (e.g., % ash or % sulfur) of the coal that isbeing bid and offer an additional bid for the same lot. However, thebuyer may value these two offerings for lot-1 (offering A and offeringB) differently and may assign two different transformation factors (1and 1.05 respectively) for those two offerings.

It is shown in FIG. 9 that supplier A's offering B for lot-3 (site C) isnot assigned a transformation factor by the buyer. A buyer may notassign a transformation factor to a supplier's bidding when, forexample, the supplier's bidding is received after the bidding on thecorresponding lot is closed or the supplier is not authorized to offeran additional bid. In that case, the value of the offering B (fromsupplier A) at site C may not be used for further computation (e.g., aspart of the bid selection process discussed hereinbelow with referenceto FIG. 10).

FIG. 10 illustrates an exemplary table 640 showing which individualofferings (e.g., the offerings highlighted in rectangular boxes 650)from a supplier (here, supplier A) are selected to determine thetransformation factor for that supplier for the aggregate lot. In oneembodiment of the present invention, at the time of the last individuallot closing, the buyer may select one transformed bid per individual lotper supplier (block 560, FIG. 8) prior to commencing the bidding for theaggregate lot. For example, in the offering scenario illustrated in FIG.9, the lot-3 may be the last individual lot to close and the pricesoffered by different items on different lots may be those shown in thetable 640 in FIG. 10. The transformed values for each offering per lotare also, shown in FIG. 10. It is noted that although the selectionblocks 650 in FIG. 10 are for the lower of the two transformed valuesper lot, that may not be necessarily the case always. It is up to thebuyer to select which transformed value to include as part of thetransformation factor calculation prior to opening the aggregate lot forbidding.

After the buyer 10 selects the preferred offering from each supplier foreach individual lot on auction, the bidding software may add eachselected transformed value to produce an aggregated price ortransformation factor for that supplier (block 562, FIG. 8) withoutrevealing the underlying transformation factors to the supplier.Alternatively, the buyer 10 may itself compute the transformation factorfor each supplier and input that transformation factor to the biddingsoftware for storage and for use in further future calculations. In analternative embodiment, the buyer 10 may specify to the bidding softwarethe criterion by which to select the preferred transformed value (e.g.,the lowest transformed value per lot), and the bidding software mayautomatically generate the corresponding transformation factor for eachparticipating supplier at the closing of the last individual lot. Foreach supplier A-D, the corresponding transformation factor may then beprogrammed into the bidding software as the aggregate lot's (e.g.,lot-4, here) transformation factor for that supplier. In the case ofsupplier A's offerings illustrated in FIG. 10, the transformation factorfor supplier A is computed to be 1195000 (representing the sum of theselected transformed values 200000+475000+520000=1195000).

After the supplier-specific transformation factors for the aggregate lotare generated, the bidding software may notify (e.g., via e-mail) eachsupplier A-D of the selected offering the buyer had chosen in each lot(without revealing the corresponding transformation factor). Forexample, supplier A may be notified that his three offering A's for lots1-3 respectively are selected by the buyer to be included in theaggregate lot bidding. The aggregate lot (here, lot-4) may then beopened for bidding (block 564, FIG. 8). Each supplier A-D may berequired to bid a percentage discount that the supplier would offer (forthe aggregate lot-4) in order to be awarded all of the business (throughthe aggregate lot-4) in all of the individual lots run previously.

FIG. 11 shows an exemplary table 660 illustrating a bidding receivedfrom a supplier (here, the supplier A) for an aggregate lot (here,lot-4). As computed with reference to the selected offerings 650 in FIG.10, the aggregate transformed value or transformation factor forsupplier A is 1195000. Supplier A may then bid the aggregate lot-4 at98.5%, or, at 1.5% discount off its previous offerings. Based on thetransformation factor for supplier A and based on the new percentage bid(here, 98.5%) received from supplier A, the bidding software may computethe transformed value for the aggregate lot for supplier A and send thatinformation to the buyer so that the buyer may evaluate the supplier'sbid (block 566, FIG. 8). In one embodiment, the supplier A's bid (98.5%)may be multiplied with supplier A's transformation factor (1195000) forthe aggregate lot-4 to generate supplier A's transformed value(1195000×0.985=1,177,075) for the aggregate lot. Similar transformedvalues for other suppliers (here, suppliers B, C and D) in the marketmay also be computed as depicted in FIG. 12, which illustrates anexemplary table 700 showing transformed values for the bids receivedfrom four suppliers A-D for an aggregate lot (here, the lot-4).

The bidding software receives in real-time the bid offered by eachsupplier for the aggregate lot. In one embodiment, the bidding softwaremay be configured to provide a real-time feedback to each supplier notin the lead position indicating how deep their discount would have to beto take all of the business offered through the aggregate lot (block568, FIG. 8). Alternatively, the bidding software may transmit (e.g.,via e-mail) each received bid for the aggregate lot to the buyer inreal-time and, then, the buyer may compute the additional discountinformation for a specific bidder not leading in the market and sendthat new discount information to the bidding software (e.g., via e-mailor through a web page data entry), which, in turn may forward thatinformation to the target bidder (e.g., via an e-mail notification). Forexample, as shown in FIG. 12, the discount offered by supplier A (98.5%)for the aggregate lot-4 places the transformed bid for supplier A($1,177,075) in the third-place among all the transformed bids in themarketplace. In that case, the bidding software or the buyer may notifysupplier A that it needs to offer a discount of 7.4% (i.e., offer aprice of 92.6% for the aggregate lot-4) to become the leading bidder byaround $1500. The computation is given as follows:New transformed value for supplier A ($1,106,570)=(New or recommendedoffer price for supplier A (92.6%))×(the transformation factor forsupplier A (1195000))This new transformed value for supplier A ($1,106,570) is $1,555 lowerthan the previous lowest transformed bid (i.e., $1,108,125 from supplierD) in FIG. 12.

The buyer may continue the feedback process for a predetermined time(e.g., until the closing time for the aggregate lot) or until the marketstabilizes (as indicated by lack of further price discounts from thesuppliers). Thereafter, the buyer 10 may determine the winning bidderfrom the most recent set of transformed values for the aggregate lot(block 570, FIG. 8). For example, the buyer may typically, although notnecessarily, select that supplier whose discount offering results in thelowest transformed value for the aggregate lot. In the bidding chartillustrated in FIG. 12, the buyer may select, for example, supplier D asthe winning bidder for the aggregate lot-4. Because of the inclusion ofbuyer-specified transformation factors (for example, the transformationfactors “1.0” and “0.95” shown in the table 640 in FIG. 10) in thecomputation of the supplier-specific transformation factor (for example,the transformation factor “1195000” shown in FIG. 11), the ultimatetransformed value from the winning bidder (e.g., the transformed value“$1,108,125” in FIG. 12 for supplier D) for the aggregate lot representsthe true transformed price for the aggregate lot and it also accuratelyrepresents the optimum price a buyer can attract for the aggregate lot.

It is noted that the buyer may not award the contract for the aggregatelot to a single bidder (e.g., the winning bidder). For example, it maynot be logistically beneficial to the buyer to award all lots to onebidder. In that case, the buyer may decide not to select a winningbidder based on the aggregate lot, but, instead, to select separatewinning bidders for each individual lot. Also, the buyer may select abidder different from the winning bidder (e.g., supplier D in FIG. 12)to award the contract for the aggregate lot because the buyer may notfeel comfortable dealing with the current winning bidder because of, forexample, that bidder's prior unfair dealings with the buyer or thatbidder's negative reputation in the marketplace, etc.

The foregoing describes an auction methodology wherein individualdemands are bid in lots and an aggregation of several lots is then runas an individual lot to determine if the buyer can attract a lower priceoffering from bidders by selecting to award the total volume of all ofthe individual lots to one bidder. This helps buyer in deciding whetherto award business as individual lots or as aggregated grouping of lots.The aggregated bid takes into account each bidder's individual offeringsfor each individual lot based on the assigned factor for that lot andthe proportion of the aggregated volume represented by that lot. Abidder-specific transformation factor for the aggregate lot is computedby combining selected transformed values (one for each lot) that takeinto account that bidder's price offerings for individual lots and thebuyer-specified transformation factors for that bidder. Each bidder isthen invited to bid a discount percentage for the aggregate lot. Thisdiscount percentage is then used along with the bidder-specifictransformation factor to generate that bidder's transformed value forthe aggregate lot. The buyer may compare each bidder's transformed valuefor the aggregate lot and may request one or more bidders to offerfurther discounts to stay competitive in the market. The bidder with thelowest transformed value for the aggregate lot may be selected as thewinning bidder. The combination of bid transformation and lotaggregation results in obtaining an optimum bid for the buyer because itallows the buyer to accurately evaluate the bids received for theaggregate lot.

While the invention has been described in detail and with reference tospecific embodiments thereof, it will be apparent to one skilled in theart that various changes and modifications can be made therein withoutdeparting from the spirit and scope thereof. In particular, it should benoted that while the auction functions described above have beendescribed in the context of downward pricing auctions, the auctionfunctions can be equally applied to upward pricing auctions. Thus, it isintended that the present invention cover the modifications andvariations of this invention provided they come within the scope of theappended claims and their equivalents.

1-21. (canceled)
 22. A method for conducting an auction over a network,wherein each of a first and a second bidder is competing for a first lotand a second lot to be auctioned by an auction requester, said methodcomprising: receiving electronically at least one bid for each of saidfirst and said second lots from each of said first and second bidders,wherein the first and second bidders are sellers for supplying the firstand second lots and wherein the auction requester is a buyer seeking topurchase the first and second lots; waiting until bidding for each ofsaid first and said second lots is closed; for said first bidder,presenting a first transformed price for an aggregate lot based on afirst price offered for the aggregate lot by the first bidder and one ormore first transformed bids received from said first bidder for saidfirst and second lots individually, wherein each of the one or morefirst transformed bids is based on a first transformation function and afirst set of non-comparative bid parameters, and wherein the firsttransformation function and at least one of the first set ofnon-comparative bid parameters are known only to the auction requester;and for said second bidder, presenting a second transformed price forsaid aggregate lot based on a second price offered by the second bidderfor the aggregate lot and from one or more second transformed bidsreceived from said second bidder for said first and said second lotsindividually, wherein each of the one or more second transformed bids isbased on a second transformation function and a second set ofnon-comparative bid parameters, and wherein the second transformationfunction and at least one of the second set of non-comparative bidparameters are known only to the auction requester.
 23. The method ofclaim 22, further comprising: assigning a first set of transformationfactors corresponding to the one or more first transformed bids receivedfrom said first bidder, wherein each of the first set of transformationfactor is indicative of a valuation by the auction requester for thecorresponding one of the one or more first transformed bids, and whereinat least one of the first set of transformation factors is known only tothe auction requester: generating a first set of transformed values forsaid first bidder, wherein said first set of transformed values isgenerated by applying a corresponding one of the first set oftransformation factors to each of the one or more first transformed bidsreceived from said first bidder; assigning a second set oftransformation factors corresponding to the one or more secondtransformed bids received from said second bidder, wherein each of thesecond set of transformation factor is indicative of a valuation by theauction requester for the corresponding one of the one or more secondtransformed bids, and wherein at least one of the second set oftransformation factors is known only to the auction requester; andgenerating a second set of transformed values for said second bidder,wherein said second set of transformed values is generated by applying acorresponding one of a second set of transformation factors to each ofthe one or more second transformed bids received from said secondbidder.
 24. The method of claim 22, further comprising comparing saidfirst transformed price with said second transformed price to determinea winning bidder for said aggregate lot from said first and said secondbidders.
 25. The method of claim 23, wherein presenting said firsttransformed price for said aggregate lot includes: selecting a firstgroup of transformed values from said first set of transformed values,and combining said first price with said first group of transformedvalues to compute said first transformed price; and wherein presentingsaid second transformed price for said aggregate lot includes: selectinga second group of transformed values from said second set of transformedvalues, and combining said second price with said second group oftransformed values to compute said second transformed price.
 26. Themethod of claim 25, wherein combining said first price with said firstgroup of transformed values includes multiplying said first price with afirst summation generated by adding all transformed values in said firstgroup of transformed values, and wherein combining said second pricewith said second group of transformed values includes multiplying saidsecond price with a second summation generated by adding all transformedvalues in said second group of transformed values.
 27. The method ofclaim 25, wherein selecting said first group of transformed valuesincludes selecting a corresponding lot-specific transformed value foreach of said first and said second lots from said first set oftransformed values, and wherein selecting said second group oftransformed values includes selecting a corresponding lot-specifictransformed value for each of said first and said second lots from saidsecond set of transformed values.
 28. The method of claim 25, whereinsaid first group of transformed values includes: a first transformedvalue from said first set of transformed values, wherein said firsttransformed value is the lowest transformed value for said first bidderassociated with said first lot, and a second transformed value from saidfirst set of transformed values, wherein said second transformed valueis the lowest transformed value for said first bidder associated withsaid second lot; and wherein said second group of transformed valuesincludes: a third transformed value from said second set of transformedvalues, wherein said third transformed value is the lowest transformedvalue for said second bidder associated with said first lot, and afourth transformed value from said second set of transformed values,wherein said fourth transformed value is the lowest transformed valuefor said second bidder associated with said second lot.
 29. The methodof claim 25, further comprising: reporting to said first bidder each bidreceived therefrom that corresponds to one of said first group oftransformed values; and reporting to said second bidder each bidreceived therefrom that corresponds to one of said second group oftransformed values.
 30. The method of claim 23, further comprisingallowing said auction requester to specify said first and said secondsets of transformation factors.
 31. The method of claim 22, furthercomprising determining the first bidder as a leading bidder based on thefirst transformed price and the second transformed price; and subsequentto the determining, providing a feedback to said second bidder inreal-time with additional discount information for said second price tostay competitive prior to the close of the online auction.
 32. A systemfor conducting an auction, wherein each of a first and a second bidderis competing for a first lot and a second lot to be auctioned by anauction requester, comprising: a processor configured to: receive atleast one bid for each of said first and said second lots from each ofsaid first and second bidders, wherein the first and second bidders aresellers for supplying the first and second lots and wherein the auctionrequester is a buyer seeking to purchase the first and second lots; waituntil bidding for each of said first and said second lots is closed; forsaid first bidder, present a first transformed price for an aggregatelot based on a first price offered for the aggregate lot by the firstbidder and one or more first transformed bids received from said firstbidder for said first and second lots individually, wherein each of theone or more first transformed bids is based on a first transformationfunction and a first set of non-comparative bid parameters, and whereinthe first transformation function and at least one of the first set ofnon-comparative bid parameters are known only to the auction requester;and for said second bidder, present a second transformed price for saidaggregate lot based on a second price offered by the second bidder forthe aggregate lot and from one or more second transformed bids receivedfrom said second bidder for said first and said second lotsindividually, wherein each of the one or more second transformed bids isbased on a second transformation function and a second set ofnon-comparative bid parameters, and wherein the second transformationfunction and at least one of the second set of non-comparative bidparameters are known only to the auction requester; and a memory coupledto the processor and configured to provide the processor withinstructions.
 33. A computer program product for conducting an auction,wherein each of a first and a second bidder is competing for a first lotand a second lot to be auctioned by an auction requester, the computerprogram product being embodied in a computer readable medium andcomprising computer instructions which, when executed by a processorcause a computer to: receive at least one bid for each of said first andsaid second lots from each of said first and second bidders, wherein thefirst and second bidders are sellers for supplying the first and secondlots and wherein the auction requester is a buyer seeking to purchasethe first and second lots; wait until bidding for each of said first andsaid second lots is closed; for said first bidder, present a firsttransformed price for an aggregate lot based on a first price offeredfor the aggregate lot by the first bidder and one or more firsttransformed bids received from said first bidder for said first andsecond lots individually, wherein each of the one or more firsttransformed bids is based on a first transformation function and a firstset of non-comparative bid parameters, and wherein the firsttransformation function and at least one of the first set ofnon-comparative bid parameters are known only to the auction requester;and for said second bidder, present a second transformed price for saidaggregate lot based on a second price offered by the second bidder forthe aggregate lot and from one or more second transformed bids receivedfrom said second bidder for said first and said second lotsindividually, wherein each of the one or more second transformed bids isbased on a second transformation function and a second set ofnon-comparative bid parameters, and wherein the second transformationfunction and at least one of the second set of non-comparative bidparameters are known only to the auction requester.
 34. A method forconducting an auction over a network, wherein each of a first and asecond bidder is competing for a first lot and a second lot to beauctioned by an auction requester, said method comprising: receivingelectronically at least one bid for each of said first and said secondlots from each of said first and second bidders, wherein the first andsecond bidders are sellers for supplying the first and second lots andwherein the auction requester is a buyer seeking to purchase the firstand second lots; waiting until bidding for each of said first and saidsecond lots is closed; and inviting by electronically transmitting datato said first and said second bidders to offer a first price and asecond price respectively for an aggregate lot after said bidding foreach of said first and second lots is closed, wherein said aggregate lotis created by combining said first and said second lots.
 35. The methodof claim 34, wherein inviting said first and said second bidders tooffer said first and said second prices respectively includes: askingsaid first bidder to offer said first price as a first discountpercentage; and asking said second bidder to offer second price as asecond discount percentage.
 36. A system for conducting an auction,wherein each of a first and a second bidder is competing for a first lotand a second lot to be auctioned by an auction requester, comprising: aprocessor configured to: receive electronically at least one bid foreach of said first and said second lots from each of said first andsecond bidders, wherein the first and second bidders are sellers forsupplying the first and second lots and wherein the auction requester isa buyer seeking to purchase the first and second lots; wait untilbidding for each of said first and said second lots is closed; andinvite by electronically transmitting data to said first and said secondbidders to offer a first price and a second price respectively for anaggregate lot after said bidding for each of said first and second lotsis closed, wherein said aggregate lot is created by combining said firstand said second lots; and a memory coupled to the processor andconfigured to provide the processor with instructions.
 37. The system ofclaim 36, wherein inviting said first and said second bidders to offersaid first and said second prices respectively includes: asking saidfirst bidder to offer said first price as a first discount percentage;and asking said second bidder to offer second price as a second discountpercentage.